The voters may be ready for the euro, but is Mr Brown?

'Whether and how he moves from his deep caution is the most fascinating question in British politics'
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Rather as Basil Fawlty couldn't stop talking about the war to his German guests, so Peter Hain, the Minister for Europe, finds it almost impossible to stop talking about the euro, even though he knows he shouldn't.

In a conversation with Le Figaro that can hardly fail to inflame the Treasury, Mr Hain has just floated a detailed timetable for potential British entry into the single currency, pointing to a referendum in the spring and autumn of 2003. As it happens, Mr Hain's remarks were not part of some plot to soften up British opinion for entry. Today Jack Straw travels to The Hague to make an important speech on the future of European institutions. In it the Foreign Secretary will set out some of the latest British thinking in advance of the Convention due to begin at the end of this month under the chairmanship of Valery Giscard d'Estaing. It was hardly in the interests of Mr Hain, as the senior British representative on the Convention, to do anything to distract from his boss's focus on the daunting exercise in constitution-building in which he will be taking part.

What's more, Mr Hain didn't really confide in Le Figaro anything that isn't a very open secret in Whitehall, namely that a working hypothesis exists that would allow a euro-referendum as early as spring 2003. And while what Mr Hain said wasn't really new, some of what Mr Straw says today will be. True, the intriguing idea of, in effect, a full-time President of the EU, at the very least complementary to the Commission President, is floated as an option in terms so opaque as to be almost invisible. But others, such as rotating the presidencies of the ministerial councils, which cover subjects ranging from agriculture to the environment, every two and a half years, and making those council chairs an "executive board" responsible for the day-to-day running of the EU, are substantive.

And what will shine through is the British belief that it is the ministerial and prime ministerial councils that must be strengthened. While there are also ideas for entrenching the European Parliament's rights of scrutiny, it is the councils, composed of representatives of elected national governments, which in British eyes principally give the EU democratic legitimacy.

But if Mr Hain's Fawlty-style tic did not produce anything new, it was a reminder, if needed, of how difficult it is to stay silent about what everyone agrees is by far the biggest decision the government will have to take in the coming year – whether to call a referendum on the euro. It does not reflect a change of policy, which remains in favour of entry in principle but only if and when Mr Brown's five economic tests are met. However, what it does reflect, perhaps subconsciously, is a subtle but perceptible change in the weather.

It always used to be said (subject, of course, to the tests) that Mr Blair would call a referendum on the euro if and when he thought he could win. That no longer has much meaning, if it ever did. First, it implies a greater detachment on the Prime Minister's part than is justified. By all accounts, Mr Blair wants it enough to take what he believes is a justifiable risk. He isn't persuaded by the argument – shared by a few in Downing Street and many more in the Treasury – that it would be better to wait until 2006, perhaps, by which time the euro would be such a fact of life that the British people would sleepwalk into it.

He is, it is said, much more sympathetic to the argument that to wait until then would sap Britain's credibility in Europe; would reduce, perhaps fatally, Britain's chances of filling the leadership vacuum in the EU, and would make it more difficult to reshape policy (not least, to take one topical example, on the over-rigid stability pact, which Gordon Brown has rightly inveighed against). But, above all, he is said to be increasingly optimistic that he could win in 2003.

What's more, it looks as if Mr Blair is right. It's not just that there is gradually increasing polling evidence that once the Government – assuming it has the necessary support of Mr Brown – had recommended entry, there could be a majority in favour. It's also that further detailed preparatory work strongly reinforces it. In particular, focus-group research for Britain in Europe suggests that, apart from a substantial hardcore minority of opponents, the thirst for information on EMU – and the public's willingness to take the Government seriously as providers of it – is great (just as with, say, Aids or the millennium bug).

I yield to no one in my scepticism of focus groups. But this is much in line with what any reporter on the road during the general election could hear with their own ears. Self-declared opponents of entry, if pushed, would say first that they didn't "know enough about it" and, secondly, that "no one is really making the case for it". The qualitative research suggests that some of the pro-euro messages – from avoiding "isolation" to enjoying lower prices – play very powerfully. Mr Hain, a veteran of the Welsh referendum, knows all this.

One counter-argument is this: supposing Mr Blair became unpopular and the referendum became one on his premiership, rather as the French Maastricht referendum was on François Mitterand's record. Well, given that Mr Blair's popularity remains undented after the pounding he has had in the last few weeks, it's difficult to see how this would happen. In that sense ministers may be right when they say that the press may be less in touch than they are.

That isn't to say a referendum would not be a gamble – albeit a sensible one. If the Cabinet were to hold – an unprecedented event – a substantive meeting on the issue, there would probably be a majority in favour of doing what Mr Blair wanted because he wanted it. Margaret Beckett appears to be a striking, if tentative, convert. But there are caveats. Firstly, there are strong ministerial voices arguing – for example – that an EU-wide interest rate could leave higher taxes or spending cuts as the only inflation-fighting weapon, thus jeopardising all Labour's promises – an argument that could resurface in a referendum. Secondly, euro-entry is not exactly a priority for other Cabinet ministers. Focused on their departments, they aren't yet geared up for the fight

But the big caveat is Mr Brown. Whether and how he moves from his present deep caution remains the most fascinating question in British politics. By all accounts, the Big Meeting between the two is yet to happen. But while Mr Blair – whose enthusiasm is well attested – is a necessary condition, he is not sufficient. Now, it is the Chancellor who is both a necessary and sufficient condition for entry.

There is a link between all this and Mr Straw's speech, even though he will not dwell on the euro. Firstly, because a Europe on the lines that he will suggest could make euro-entry more congenial to the doubters. But, secondly, because he will offer a robust defence of the EU and of pooling sovereignty to achieve domestic goals. But that should not disguise the central fact. The key issue is no longer so much one of agonising over whether the British people can wear it but of what is the dynamic within the Government.